The markets rallied 3% on Wednesday led by rally in IT shares after Infosys earnings beat street expectations. The Nifty closed at 5,099, up 125 points and Sensex ended at 16,958, up 422 points.
The Nifty had opened on an upbeat note after Infosys results were slightly better than expected. The index received a jolt in afternoon trades following IIP data at 4.1% for August against market expectation of 5%. But, heavy buying in IT shares and recovery in European markets helped the Nifty scale a high of 5,110 and end near the day’s high.
Markets in Asia rebounded from lows buoyed by Chinese banks, offsetting weak results from the alumunium giant Alcoa and concerns in the Euro zone. The Hang Seng index closed up 0.2% and Shanghai Composite gained 3%; Japan’s benchmark Nikkei average, however, ended down 0.4%.
European markets snapped back into the green after slipping in early trade following refusal by the Slovakian parliament to expand the Euro-zone bailout fund. The International Energy Agency cut the global oil forecast citing lower-than-expected growth forecast. The CAC and DAX were up over 1% each, while the FTSE 100 advanced 0.6%.
Back in India, Infosys kicked off the second quarter earnings season. Net profit after tax was reported at Rs 1,906 crore against Rs 1,702 crore in the previous quarter, up 9.7% y-o-y; this was better than Rs 1,890 crore expected by the street. Revenues grew by 16.6% to Rs 8,099 crore.
Infosys has guided growth of 17.1-19.1% as against the earlier 18-20%. While the numbers were slightly better than expected, global uncertainties may affect revenue growth going forward, said analysts. Brokerage Prabhudas Lilladher has retained a buy rating on Infosys on the back of an upward revision in EPS guidance from Rs 130 to Rs 143-145 and marginal downward revision in dollar revenue growth. PINC Research has also put a buy recommendation with a target of Rs 2,730.
On the macro front, IIP grew at 4.1% in August compared to 4.5% during the same period last year due to contraction in manufacturing, mining and electricity. “Against the backdrop of slowing industrial production and global growth concerns, the RBI may take a pause in interest rate increase cycle in its meeting on October 25,” said Hemant Kanawala, Head of Equities – Kotak Mahindra Old Mutual Life Insurance Ltd.
Market analysts expect Nifty to scale to 5,200 in the near term since the index was able to cross 5,050 on closing basis.
Among the Sensex stocks, major gainers were Infosys, up 7% at Rs 2,680; TCS and Wipro were up 2-3% each. Infosys and TCS contributed around 130 points to the Sensex's gains.
The prominent losers on the Sensex were Coal India and Tata Power, down almost 1.7% each and Bharti Airtel slipped 0.2%.
All the sectoral indices ended in the green.
Besides IT shares, BSE banking index was the next major gainer, up over 3%. State Bank of India surged over 6%, Axis Bank gained 4% and ICICI Bank was up 3%.
From the broader markets, the midcap and the smallcap indices were up 1.4% and 1.2% each.
The market breadth was positive – 1846 stocks advanced for 974 declines.
